A staggering number of UK companies are small businesses (SMEs). However, these SMEs face various challenges, given that 20% of small businesses fail in the first year and 60% fail in the first three. The overall number of smaller businesses fell from 5.9 million to 5.5 million between 2020 and 2021, a 6.6% decline.
Now that the cost of living has been rising and shows no signs of slowing, together with the UK leaving the EU, it will be even more difficult for SMEs to combat nationwide pressures. There is a global scarcity of goods, customers have less spare cash, and workers demand higher salaries to counteract rising inflation.
Today, Rhino wants to examine the main risks faced by small businesses and the effects these have on the stability of your business and how you can combat them.
Due to events like COVID-19 lockdowns, Brexit, and ongoing supply chain problems, UK businesses have identified financial difficulties as their primary concern. This won't come as a surprise, given that the aforementioned events have led to higher VAT rates and economic inflation, raising the cost of products and services. Tax hikes further worsen the financial situation of struggling firms. This could ultimately discourage customers from purchasing your products and services, resulting in a decline in revenue.
On top of that, the Covid lockdowns drove companies to spend their current cash, and many of them sought financial aid to survive while being closed. According to research, insolvency is the top risk posed to smaller businesses in the UK. Something many tried their best to avoid during the pandemic.
Businesses can try to endure this uncertain time. Nevertheless, investing in improved financial management, regularly checking their supply chain for delays, and developing technology procedures to cut costs will ultimately help forge a smoother process and point towards any upcoming issues making for a seamless business operation.
Every company needs competent workers, but due to Brexit and Covid-19, there has been an acute shortage of workers across all industry sectors. Many companies in the UK are reporting issues with acquiring new employees and keeping those employees on board.
Due to the lack of skilled workers, many businesses are increasing wages in an effort to keep their current employees and recruit new ones. However, it needs to be clarified if these salary increases are budgeted for and whether they actually have a detrimental effect on an organisation's cash flow.
This is an awkward paradox to manage as businesses are concerned about handling the increasing post-pandemic customer demand, which may become unmanageable given the staff shortages. As a result, companies might spend money on fostering a learning environment by connecting with educational institutions and training centres, providing incentives, and nurturing in-house talent.
Businesses might think about using digital solutions to eliminate tedious, repetitive tasks so that employees can focus on the more skilled aspects of their jobs. Skilled workers are a company's most valuable assets; thus, maintaining an emphasis on their well-being and the contribution they make could help in keeping your current skilled workers happy.
One of the most significant political events in British history was Brexit. This vote left supply chains for UK companies doing business with the EU (European Union) confused and potentially exposed to new risks. Since this decision was taken, the lack of raw materials and labourers has had the biggest impact on various industries, which are only now beginning to be realised.
According to the Federation of Small Businesses (FSB) "Ready to Launch" report, many SMEs lack the help and guidance they need to take advantage of the new trade agreements the UK has signed since it left the EU. Businesses that previously relied on exporting their goods to EU nations have seen a decline in sales and growth as a result of this.
Furthermore, many small companies in the UK think that Brexit will interfere with their ability to operate in the short to medium term. As a result, many businesses jumped on the opportunity to preserve the quality of their goods by switching to UK-based suppliers.
There are many reasons why a company's operations can be disrupted, but over the past few years, Covid-19 was definitely the biggest culprit. Repeated lockdowns hurt businesses' ability to operate profitably and maintain productivity. As employees were furloughed or chose to work from home, companies were left empty for a prolonged period of time.
This, in turn, meant companies had to deal with fresh business disruptions due to customer preference changes and overall shortages. With warehouse workers, shippers and delivery drivers slowly returning to 'normal' but with increased bottlenecks, these issues are still proving challenging to this day.
Companies that invest in sound business continuity plans can reduce the chance of interruption. If the past few years have taught us anything, it's that a business impact analysis on the problems that might impede our capacity to conduct work and keep our business open should be reviewed regularly.
It's essential to stay in touch with your insurance agent or provider. They can evaluate your current cover and suggest upgrades and risk-management strategies to keep up with your needs while responding to unforeseen situations. With that said, explore ways to cut costs in your trade business today.
Every year, we see that technology is key to expanding industries like the trade and construction sectors. It helps businesses in boosting productivity while retaining a competitive advantage. However, as they adopt innovative technologies, they may be more susceptible to system failures, data loss, and cybercrime threats.
Although they are becoming increasingly dependent on new technology to survive, small businesses have identified it as one of their top risks. Companies that keep investing in technology stand to benefit from increased productivity, flexibility, and client satisfaction.
Take, for example, our articles on newer techniques like EV chargers and Heat Pump training. From the government's targets, they are the next big steps for Plumbers and Electricians, and it may be a route for your business to grow.
For small business owners, the COVID-19 pandemic, Brexit, and now the cost of living issues are having a substantial adverse effect on the way we work. If this article highlights anything, it is the biggest threats facing SMEs and the effects these threats are having on everyday lives.
It is obvious that when these risks manifest, small business owners must deal with various consequences, including loss of revenue, damage to their reputation, higher employee turnover, and a decline in customers.
Many threats to small businesses can feel uncontrollable, but owners have power over how they respond to or prepare for such events. Getting thorough business insurance, including sufficient Public Liability, can protect you against significant events and smaller, less damaging everyday risks.
Call Rhino Trade Insurance at 0116 243 7904 or visit our website for all the insurance information you could wish for. Find a price in a flash with our handy online quote engine here.
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